How To Understand And Use IBD's Dividend Screens

When IBD revamped its Income Investor column several months back, it introduced three screens aimed at successful dividend investing. They are the backbone of the column.

Most of the companies covered in this daily column (today on Page B9) are selected from the three screens. The screens seek stocks with solid and growing dividends, extremely stable annual earnings, and other characteristics needed to maintain a regular flow of dividends. Relatively few stocks make these stringent lists.

Don't look for fast earnings growth or superb share-price performance in this feature; dividend returns take precedent in the Income Investor.

Here's a guide to the screens and how to make best use of them.

Of the three screens, the broadest screen is the Dividend Leaders. Some of America's best-recognized companies have been appearing on this list, thanks to their histories of dependable dividends. Merck (MRK), Microsoft (MSFT) and Home Depot (HD) recently showed up in this screen.

Utility Leaders, the second screen, follow basically the same selection criteria. Traditionally, utilities have been a haven for income-focused investors. These companies tend to have little growth, but their steady and reliable revenue streams make them ideal dividend providers.

That steady nature also gives utilities relative safety when the general market falls on hard times and growth stocks are getting trampled.

REIT Leaders looks at another traditional fort for income investors. Real estate investment trusts are companies created under a law that lets them avoid paying corporate taxes as long as they pass on their profits to shareholders. They use dividends to pass on those profits, making REITs one of the surest bets for income portfolios.

Like utilities, many REITs have steady revenue streams. For example, they may own specialized buildings for medical or technology companies and obtain regular lease proceeds. Or, they might own apartment complexes, securing a wealth of rent payments.

Slow economic conditions can hurt those businesses, but they tend to be less volatile than most other businesses.

Of the four data columns on each list, the most important are the annualized dividend yield and the dividend growth rate. By studying those numbers and comparing them, investors can gauge which companies they can research further.

Use the weekly charts and the story on the page to learn fundamental and technical details.

See Also

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07/31/2015 10:37 AM ET

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Investor’s Business Daily provides exclusive stock lists, investing data, stock market research, education and the latest financial and business news to help investors make more money in the stock market. All of IBD’s products and features are based on the CAN SLIM® Investing System developed by IBD’s Founder William J. O’Neil, who identified the seven common characteristics that winning stocks display before making huge price gains. Each letter of CAN SLIM represents one of those traits.

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